What's an Easement?
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In Virginia, property owners who place their land in conservation easements are eligible to deduct the value of the easement from their federal income taxes. They also qualify for a reduction in local property taxes and a transferable income tax credit, worth 50 percent of the value of the easement, that can be taken over six years.
Because the owner may continue using the land, the easement's value is not the same as the property's market value. Instead, it is determined through a complicated appraisal of the lost use resulting from the easement restrictions. It could be a fraction -- say 25 percent or 50 percent -- of the land's market value.
A property with a market value of $10 million, for example, could yield an easement worth $3 million. The owner, in turn, would qualify for a tax credit valued at $1.5 million.
If the owner doesn't earn enough income over six years to claim a $1.5 million tax credit, he may sell the credit to someone who can.
Source: Virginia Outdoors Foundation and Virginia Department of Taxation
